Analysis: Drillers win, for now, on ban after Gulf spill

By Jeremy Pelofsky

NEW ORLEANS (BestGrowthStock) – A U.S. appeals court on Thursday refused to suspend deepwater oil drilling while the merits of the case are considered but another moratorium is expected and, with it, likely more litigation.

The White House sought to suspend deepwater drilling of new wells as it investigates the April 20 rig explosion that unleashed BP Plc’s massive oil spill in the Gulf of Mexico.

* The Interior Department is likely to issue a revised moratorium quickly that makes it more flexible than the original order. The U.S. Court of Appeals for the Fifth Circuit refused to stay a lower court ruling that lifted the moratorium on all new exploratory and development wells below 500 feet of water for six months. The lower court judge said it was too broad, arbitrary and failed to take into account the economic impact on workers and local communities.

* The new moratorium is a bid to placate drilling companies. The Obama administration likely hopes it will pass muster with the federal courts that were not sympathetic to its arguments about the risks of a second well blowout since drillers have not yet resumed operations after the initial freeze. If the Interior Department issues a new moratorium as expected, drilling companies could amend their lawsuit or file a new one, which could further prolong litigation.

* Depending on what the new moratorium says, drilling companies like Hornbeck Offshore Services Inc and Diamond Offshore Drilling Inc could try to begin working again. The first suspension order halted new exploratory and development well drilling and affected 33 rigs. It did not halt wells already producing oil and gas.

* While Wall Street analysts said the ruling could give a lift to the battered shares of drillers, the companies were still in legal limbo because the appeals court will consider in late August the merits of whether the lower court decision lifting the moratorium was correct.

* The Obama administration could ask the full appeals court or the U.S. Supreme Court for a stay. But because an Interior Department official said on Thursday that a new moratorium order would likely be issued, that legal move appears unlikely.

(Editing by John O’Callaghan)

Analysis: Drillers win, for now, on ban after Gulf spill